Pullback Volume
Evidently the market decided it wanted to spend some more time working inside the daily rectangle. In fact, today we dropped back almost to the center of the pattern. With a gap down opening, price built a floor just under the 850 level and went sideways until after the lunch hour.
When there was no trade in the first hour, I marked off the range and waited for a breakout (A) and a possible pullback (B.) Then I passed the trade that turned into a Measured Move.
On pullback trades I want to see a decrease in volume before I’m comfortable with a trade. Sometimes volume doesn’t make a difference, but over time I get better consistency when I insist on either correct volume or multiple reasons to take a trade. At least I got a lot of paperwork done today.
Hi Lowell,
I’m really enjoying your site. Thank you for sharing your trading experiences so generously.
My question is this: On pullback trades, am I to understand that you do NOT bracket the first hour’s range with stop entry orders, but rather you wait for the break out of the range and then you enter on a retest of the first hour’s range as support/resistance?
Thank you,
David
Hi David,
If I find an early trade, I ignore the first hour range and take any setups I find all day. If I can’t find one in the first hour I assume we may have a sideways day, and if so I try not to trade.
That’s when I mark off the high and low of the first hour and start looking for strong setups that might break out of that range. Otherwise I wait until we get a breakout and then look for a setup — which might be a pullback. This keeps me out of a lot of bad trades.
Lowell